Blimey, really?

Richard Murphy says:
October 11 2016 at 2:27 pm
Because PFI operators tend to make losses

If PFI operators tend to make losses then this means that there is a transfer from shareholders to the public services they are funding.

so why the hell is he so against PFI contracts?

26 thoughts on “Blimey, really?”

  1. John Laing Infrastructure fund seem to be making out like bandits….Capita are doing ok…

    Perhaps he can give some examples. I thought the real effect of PFI is that the public sector is paying way over the odds for these contracts, as suggested by the NAO back in 2010.

  2. Bet that the value of the assets to be retained by PFI etc isn’t being factored in or some such trick in determine a loss

  3. Having just caught up on his cretinous ramblings about Facebook, nothing is surprising.

    How in the fucking hell this moron became 0.2 “Professor” is frankly a scandal.

  4. Tim
    Admirably, you’ve exposed the Murphatollah to criticism and ridicule.
    Increasingly, he becomes irrelevant; but your responses probably give him more attention than he deserves.
    I suggest you monitor his idiocies and post a weekly Murphatollah summary.

    Murphy is a bore. His errors don’t make him interesting. BREXIT IS MUCH MORE INTERESTING!

  5. John Square, it depends on whose balance sheet you are talking about. It just so happens that funds like John Laing have an underwritten stream of income, rather like gilts. They don’t hold the loan that underpins the income. They bought the income off the 3rd party who built the hospital and committed the government to paying the income stream. All the government department is doing is paying a flat or indexed fee for something it knows nothing about. A perfect result all round.

  6. Bloke n North Dorset

    PFI is exposing the flaws in the argument for more infrastructure spending. Everyone wants to spend the Capex but hate the Opex required for operations and maintenance.

    Next time he goes off on one about his infrastructure bank ask him about the 30 year funding model needed to keep whatever idiocy he is proposing operational. I’ll bet he hasn’t thought it through.

  7. As he claimed to have done a thorough analysis of Facebook accounts does this come under offering professional advice as he is still a member of an accounting body? You would presume that any qualified accountant making that statement was referring to a technical financial analysis after all. Could be a tricky line to tread between what’s acceptable (say chatting with mates down the pub) and publishing a public blog when it comes to offering advice

  8. So PFI operators are simultaneously overcharging the government, underpaying their staff, providing cheap, poor quality services, and losing money? Impressive.

  9. So Much For Subtlety

    Richard – “So PFI operators are simultaneously overcharging the government, underpaying their staff, providing cheap, poor quality services, and losing money? Impressive.”

    It works for BAe. Apart from the losing money part. But they are not making all that much money. Despite cheating by using sub-standard materials on Britain’s nuclear submarines for instance.

    It is possible for government contractors to provide very expensive, sub-standard buildings. Look at Russia’s Sochi Olympic games. Or Brazil’s. I would even think it is the norm. Not that Ritchie is smart enough to understand or make that argument.

  10. With government projects I think its a combination of political time frame and meddling / changing the details both at the same time.
    So announce the new project will be completed by xx date while at the same time making a couple of thousand changes that were not part of the contract spec or planned in the timescales given in the first place.

    In at least one instance I know of the project was moved to a different county after foundation work started and with no change in the project live date.

  11. Bloke in North Dorset

    Martin,

    “So announce the new project will be completed by xx date while at the same time making a couple of thousand changes that were not part of the contract spec or planned in the timescales given in the first place.”

    From my experience the original announcement is made without consulting industry to find out if its even possible to meet that date in a practical way and within the already set budget, both of which have been set for political reasons.

    This leads to further tensions in the the cost V quality V time trilemma and hence the need for changes.

  12. @BiND

    “PFI is exposing the flaws in the argument for more infrastructure spending. Everyone wants to spend the Capex but hate the Opex required for operations and maintenance.”

    Amen, Brother.

    For the left-inclined infrastructure spending doesn’t seem to have a downside, does it. Running costs seem to magically disappear.

    For some reason, this is always the case in socialist and communist thinking. Hence why the ex Soviet Bloc seems to be falling apart.

  13. “For some reason, this is always the case in socialist and communist thinking. Hence why the ex Soviet Bloc seems to be falling apart.”

    That was one of the many, many fundamental issues with Soviet economic thinking. They never understood maintenance of capital projects after constrution. Largely because there was no proper concept of ownership (and thus caring), and no pricing model with which to estimate such costs.

  14. @abacab

    “Largely because there was no proper concept of ownership (and thus caring)”

    And yet this concept was spelled out to them in the 1920’s (?) with the failure of the collective farms, and subsequent famines. As soon as the peasantry were given their own patch of land within the collective, yields recovered.

    And this lesson (a communal responsibility is never fulfilled) was ignored for the next 60 years…

  15. From my experience the original announcement is made without consulting industry to find out if its even possible to meet that date in a practical way and within the already set budget, both of which have been set for political reasons.

    Given that this happens within companies themselves, it wouldn’t be surprising that it happens in governments.

  16. Largely because there was no proper concept of ownership (and thus caring), and no pricing model with which to estimate such costs.

    This isn’t surprising. They calculated the CAPEX based on a book, updated every two decades, which listed the price of sand, concrete, steel, etc. and applied factors such as snow depth, mosquito coefficients, and distance between the site and the nearest quarry. You applied your quantities and the various factors and that was your “cost” of the job. I’ve seen one of these books and a design institute calculate a price in this manner. It is mind-boggling to witness.

  17. @John Square
    “@Diogenes I thought the real deliverable of PFI was to keep borrowing off the balance sheet…”

    Originally that was one of the objectives, but when deals started to be struck it became clear that in substance the governmentr was still underwriting most of the risk in most projects, but true to form the government came up with a fudge to allow departments to avoid putting the assets on the balance sheet. I can’t remember what happens now, and I can’t be arsed to look it up, but at some point, either in the governments accounts or uin statistics shared with the OECD or in the analysis done by rating agencies it all gets added back on to the state balance sheet so there is no real added value (apart from allowing the Chancellor to give out misleading data on the National debt).

  18. @ John Square
    IIRC in the Ukraine Holodomor the famine was created in order to get rid of those peasants who didn’t want to belong to a collective farm.
    Prior to the Bolshevik revolution and since the fall of the Soviet Empire Ukraine has been a major exporter of grain and I have seen a report that Russia – excluding Ukraine – is now a net exporter of wheat, in contrast to the massive need to import grain from Australia under communism.

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